I've been trying to branch out in the financial blogs I look at. For instance, I was curious if there were still any bullish blogs about the housing market and the credit crisis. (Not bullish about the stock market, there are tons of those sites...but the stock market seems to exist in it's own fog of numbers.)

Sure enough, there are a few financial blogs that seem to be able to create graphs and interpret statistics in a way that makes my head spin. Up is down, and white is black. Some of them seem to be even saying that the whole slowdown is an illusion. (Damn my cash register -- how did it get hypnotized?)

But more often, I'm finding sites that are even more gloomy than me.

There is only one site I've found so far that really talks about the subject I'm most interested in right now: the commercial building market, especially retail.

Those of you who miss the Cassandra screeching days of old, read on. There is still some doom and gloom to forecast. Those who think it's all overblown, please pass along.

Go check out the graphs and comments about commercial space at the blog: Mish's Global Economic Trend Analysis. Check out the rising vacancy rates, but even more importantly, the lag time between construction and the spaces coming onto the market. There are very few loans being made toward new commercial buildings; but there is still an avalanche of new commercial office/retail coming onto the market.

Especially check out that graph of Architect's Billing; it looks like the Cliffs of Dover. A complete drop off.

Figure that Bend is going to be all that much later coming online and that when it hits its likely to be an even bigger percentage. Meanwhile, subtract all the office space that is about to be vacated by 'consolidating' banks, mortgages, real estate, and builders. And then take out some of the retail businesses who are oriented toward the building trade.

Bend is going to be horribly slammed. Some of the employment numbers coming out are looking weak; and they don't include all the 'contract', or under-the-table workers. This is just the beginning. There was a whole wave of workers who slid over into commercial building, but once the stuff being built is finished, I doubt we'll see too many new projects.

The optimistic job market talked about in yesterday's paper was "6-8" years out, and I've always thought Bend would probably recover nicely by then, but you'll notice also that most of the jobs mentioned are in retirement and hospitality. What do we call those people who serve others, including the elderly? Oh, yeah. Servants.

The crux of the problem, is that in Bend the housing glut is only half the problem.

In a sense, we doubled down. Not only do we have the same problem in housing as many of the overbuilt areas like California and Florida, but we have a sort of unique problem. Unlike many areas that are just overbuilt bedroom communities, (live on the outskirts, but go shop in the big town down the road), because of our isolation, we also built all the services and retail space. Just drive around. Go one block over from any major road, and there will be new, bright, shiny and totally random businesses. Who is going to find these places?
Who is going to shop there?

What's happened is, there aren't enough good paying jobs here, and if you moved here for the amenities, you certainly aren't going to accept any loss of status job. So what do you do? You start a new business. Just like the kind of business back home you always dreamed of, and which in your estimation Bend doesn't have; or more likely, we have, but you think you can do better; or most likely of all, you didn't put any real thought into at all.

I mean, how hard can it be?

But if you open a business in a location with high turnover, or a business who's format has already been tested over and over again; well, maybe Bend isn't ready for you yet. There are plenty of people who pull it off, course. But even in the best of times, and in towns with much more population to pull from, opening a business is a risky proposition. This creative destruction, this equity sinkwell, has certainly benefited the Bend economy up until now. But what happens if that equity money stops coming to town?

Timothy has questioned whether I understand capitalism and the creative destruction that takes place. Well, you've got Silicon Valley who's capital destruction rate amazes the Japanese; but the payoff is huge for the successes. But you also have small town America, where often a failed business not only affects the owner, but everyone else in the community as well. Sometimes the whole town becomes a bit of a failure.

Bend is somewhere in-between these too extremes. It can handle quite a bit of turnover because it's growing -- or at least has been growing up do now. But what happens if that equity money quits coming to town?

It appears to me, as well, that many of these newcomers are sinking more money into these businesses than they can ever extract. I mean, not only do they need to be cash flow positive, earn the owner a real profit, but at some point the original invested money needs to be taken back out. When you lose a job, you don't also lose your nest egg. So the landlords may very well be seeing a bunch of that money at the beginning of the leases, but very little of it may be making it to the end.

We in Bend bought into the idea that we were exceptional; that is already not proving to be true in housing. I don't think it was ever true in retail either. We are isolated, with no interstate, no real 4 years college, no major industry, and a limited population. We've been subsisting on the new money in town from the boom, supplemented by tourism. The boom forgave a multitude of sins; but now we're standing before the Pearly Gates and no excuse will do.

This is about the equivalent of mid-2006 of the housing boom, when it comes to retail. Lots of stores opening, lots of commercial space coming aboard.

How can anyone say it's slow in the face of that? But just as mid-2006 was the height of the boom and probably not a good time to buy if you were investing, landlords don't seem to be in a frame of mind to think there is going to be any downturn in demand. If commercial is being talked about at all, it's because of the opening of Trader Joes and imminent construction of new malls. And indeed, the big box stores will be fine and are just positioning themselves for 5 or 6 years down the road. But how many wannabe's are going to be able to wait that long?

Unfortunately for me, it looks like I'll be negotiating my lease at just about the cusp -- and it'll probably be difficult to convince any landlord that things may get dicey about halfway through any new lease so please be kind. I mean, I can't protest too much without casting into doubt my own viability. Just like most homeowners, landlords like to charge 'comparable' rates, and probably aren't much interested in getting ahead of the curve, at least not downwards.

It's a real catch-22 situation; if the economy goes so bad so fast that my landlord is willing to actually come down, it means things are dreadful. Which I don't want. But if spaces downtown are still renting within a month or two every time they come open, they probably will actually want to go up.

I suppose it doesn't really matter that rents will probably get much cheaper a couple years later, as long as I think I can pay the rent I do have. Rent isn't even the most important of the many factors in my business. Just like it may not really matter what your house is worth if you are actually living in it as long as the monthly mortgage is O.K.

Still, I guess I'll be envious of those whose luck in their timing of lease negotiations was better, and figure it all evens out in the end.